EU's Barroso calls France's 2014 budget 'satisfactory'

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PARIS (Reuters) - European Commission President Jose Manuel Barroso called France’s 2014 budget “satisfactory” on Monday, but said the euro zone’s second-largest economy still needed to do more to reduce unemployment.

President of the European Commission Jose Manuel Barroso delivers his "First Europe Speech" in Frankfurt, November 5, 2013. REUTERS/Kai Pfaffenbach

France is seeking to maintain its deficit reduction pledges to the European Union despite a sovereign credit rating downgrade by Standard & Poor’s last week that underlined fears the government will fail to push through structural reforms.

“The budget presented by France this year is satisfactory overall, in our opinion,” Barroso told LCI television during an hour-long interview.

His comments came in advance of a meeting in Brussels on Friday in which the Commission plans to appraise France’s budgetary plans.

The European Commission has urged Paris to make bolder reforms in return for granting it an extra two years to bring its public deficit within the EU target of 3 percent of output.

Although France says it plans to meet that target by 2015, the Commission has forecast the French deficit to be 3.7 percent of output in 2015.

“This is a prediction, if other measures aren’t proposed and taken,” Barroso said. “We think this (forecast) could change. France has to do more to reduce its problem of unemployment, which is the biggest problem in many countries.”

Unemployment is stuck at around 11 percent, and Socialist President Francois Hollande has vowed to reverse its rise by the end of the year, a pledge most economists deem unlikely.

France has already been stripped of its top-grade triple-A status by all three major rating agencies, but S&P was the first to downgrade it for a second time, warning that economic reforms of the past year were not sufficient to lift growth.

Hampering reform is the unpopularity of Socialist President Francois Hollande, who faces intense resistance to tax hikes and was recently forced to back down on applying a tax on trucking, in the face of violent protests.

Two polls published on Monday showed Hollande’s popularity ratings at around 22 percent, below any previous head of state in the 55 years of France’s Fifth Republic.

The Commission has said more needs to be done to revive growth beyond a modest reform enacted by Hollande’s government to add flexibility to the labour market and a review of its generous pension system.

“I am confident France will face its difficulties,” Barroso said. “I think there has been some progress on certain reforms, not only the labour market. What I have to do ... is to encourage them more.”